Kotak Mahindra Prime Ltd. vs M/s. Blaze Promoters Private Limited

PER: SHRI ASHOK KUMAR BHARDWAJ, MEMBER (J)

Kotak Mahindra Prime Limited (for brevity, the ‘Petitioner/ Financial Creditor’) has filed the present Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity, the ‘IBC, 2016’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 with a prayer to initiate the Corporate Insolvency Resolution Process against M/s. Blaze Promoters Private Limited (for brevity, the ‘Respondent/ Corporate Debtor’).

The Respondent namely, M/s Blaze Promoters Private Limited is a Company incorporated on 16.01.2006 in terms of the provisions of the Companies Act, 1956, with CIN U45201DL2006PTC144856 having its registered office at 102, Antriksh Bhawan, 22, K.G. Marg, Connaught Place, New Delhi-110001, which is within the jurisdiction of this Tribunal. The Authorized Share Capital of the Respondent Company is Rs. 14,00,00,000/-and its Paid-up Share Capital is Rs. 1,00,000/-.

It is stated by the Petitioner/FC that it a sanctioned Term Loan Facility of Rs. 20,00,00,000/- (Rupees Twenty Crores Only) to the borrower M/s. Universal Buildwell Private Limited (for brevity, ‘UBPL’), in terms of the sanction letters dated 14.06.2012 and 17.07.2012. According to the Petitioner, the said term loan facility was secured by way of the creation of charge by way of hypothecation on the current assets and movable assets of the Respondent which included goods, machinery, etc. of the Respondent and also by way of creation of mortgage with respect to the immovable property in the land for the project namely “Universal Business Park” situated at Village- Badshapur, Gurgaon, Haryana alongside unsold super built-up area admeasuring 1,00,387.13 sq. feet out of total super built-up area admeasuring 2,15,913.13 sq. feet and all appurtenances thereto alongwith development rights and existing and future FAR and TDR – 20% share again owned by the Respondent who stood as corporate guarantor to the said Term Loan Facility for the borrower viz. M/s. Universal Buildwell Private Limited.

As has been captioned in the Petition, the loan and security documents were executed between the Petitioner and the Respondent by way of Deed of Guarantee on 12.07.2012, thereby irrevocably and unconditionally guaranteeing payment of loan advanced by the Petitioner to UBPL. It is further stated by the Petitioner that default in payment by UBPL occurred and the Petitioner issued a notice dated 09.12.2016 to call upon it to repay the overdue amount of debt under the Loan Agreement which UBPL failed to comply with. The Respondent also failed to pay the outstanding due amount and thus, the loan account was declared NPA in accordance with RBI guidelines on 19.11.2014. Further, a notice dated 09.12.2016 under Section 13(2) of the SARFAESI Act, 2002 was issued to the Respondent.

It is submitted by the Petitioner that the dispute between the parties was referred for Arbitration and the Arbitral Proceedings could take place vide Arbitration Case No. 103/2017. The dispute involved the default which occurred qua UBPL and the guarantors including the Respondent. Mr. K.K. Nangia, who was appointed as Sole Arbitrator in the arbitration proceedings held principal borrower i.e., UBPL and Respondent jointly and severally liable for the default and an arbitration award was passed on 18.10.2018, in terms of which UBPL and Respondent were directed to pay the awarded amount to the Petitioner. The Arbitrator made the copies of the Award available to all the parties including the Respondent, vide Letter dated 20.10.2018. As has been espoused by the Petitioner, no amount as per award has been paid to it till date, either by the principal borrower i.e., UBPL, or the Respondent.

The particulars of the total unpaid financial debt claimed and the date of default are mentioned in Part IV of the Petition, which read thus:

From a perusal of the Part IV of the Petition (ibid), it is observed that the Petitioner has claimed an amount of Rs. 59,93,29,440.82/- (Rupees Fifty Nine Crores Ninety Three Lakhs Twenty Nine Thousand Four Hundred Forty and Paise Eighty Two only) as the “unpaid financial debt” and has referred to the date of Arbitration Award i.e., 18.10.2018 as “date of default”.

In order to prove the existence of the financial debt, the Petitioner has relied upon the following documents:

In the wake of the aforementioned, the Petitioner has prayed for initiation of CIRP against the Respondent.

Despite service of notice upon the Respondent, no appearance was entered on its behalf, thus in terms of the order dated 24.02.2023, this Adjudicating Authority proceeded against the Respondent ex-parte. Again on 12.04.2023, no one appeared on behalf of the Respondent, thus the matter was heard ex-parte. Indubitably, the Arbitrator passed the award dated 18.10.2018 in favour of the Petitioner herein. The Respondent herein was Respondent No. 6 before the Arbitrator. In terms of the award, it was held liable jointly along with other Respondents as also severally to pay inter alia an amount of Rs. 27,24,22,473.10/- as on 31.08.2017 to the Petitioner herein. The relevant excerpt of the award reads thus:

It is not for us to go into the calculation of the amount claimed by the Petitioner, while examining a petition filed under Section 7 of IBC, 2016. What we need to examine is whether the CD has defaulted in payment of an amount of more than Rs.1Crore to the Petitioner/ FC. As can be seen from the provisions of Section 5(8)(i) of the IBC, 2016, the financial debt includes the amount of any liability in respect of the guarantee for any of the liability referred to in Section 5(8)(a) to (h). In Laxmi Pat Surana vs. Union Bank of India & Anr. (Civil Appeal No. 2734 of 2020), Hon’ble Supreme Court ruled that the status of the guarantor who is a corporate person, metamorphoses into corporate debtor, the moment the principal borrower commits default in payment of debt. Further, in Kotak Mahindra Bank Limited vs. A. Balakrishnan & Anr. (Civil Appeal No. 689 of 2021), Hon’ble Supreme Court ruled that a liability in respect of a claim arising out of a recovery certificate would be a financial debt within the meaning of clause 8 of Section 5 of IBC, 2016 and the holder of a recovery certificate would be a Financial Creditor within the meaning of clause 7 of Section 5 of the Code. Thus, the liability of the Respondent arising out of the arbitral award dated 18.10.2018 would be a financial debt qua it and the Petitioner herein has to be treated as Financial Creditor.

The present Petition was filed on 24.09.2022. The period of three years from 18.10.2018 was over on 17.10.2021. Thus, the normal period of limitation was over on 17.10.2021, which date could fall between 15.03.2020 to 28.02.2022. The Arbitrator had not mentioned any date or time limit for making the payment of the awarded amount. When a court or tribunal including the arbitral tribunal does not specify any time limit for implementation of its order/award, the period for the purpose is perceived as six months. Thus, in view of the judgment of the Hon’ble Supreme Court in Suo Moto Writ Petition (C) No. 3 of 2020, the Petitioner had the balance period of limitation to the extent of 1 year and 7 months, which period if reckoned from 01.03.2022 could expire only on 27.09.2023 and the present petition was preferred on 24.09.2023, thus the petition is within the prescribed period of limitation.

It is also the case of the Petitioner that on issuance of Recovery Certificate/Arbitration Award, a fresh demand was raised which was not honoured by the Respondent, thus default was committed. The Petitioner has also relied upon judgment of Hon’ble Supreme Court in matter of Suo Moto Writ Petition (C) No. 3 of 2020 (ibid). The relevant excerpt of the judgment reads thus:

The Petitioner further referred to the judgement in “Dena Bank Vs. C. Shivakumar Reddy and Anr. in Civil Appeal No.1650 of 2020” dated 04.08.2021, wherein Hon’ble Supreme Court ruled thus:

From the bare perusal of the Hon’ble Supreme Court’s judgments (Supra), it can be inferred that the present Petition is within limitation and is not time-barred.

Thus, the present Petition being complete and the Petitioner /Financial Creditor having established the default on the part of the Corporate Debtor in payment of the Financial Debt which is above the threshold limit, the same is admitted in terms of the provisions of Section 7(5) of the IBC. In the wake, moratorium as provided under Section 14 of IBC, 2016 is declared qua the CD. As a necessary consequence of the moratorium in terms of Section 14(1) (a), (b), (c) & (d), the following prohibitions are imposed, which must be followed by all and sundry:

As proposed by the Petitioner, Mr. Raj Kumar Dad, having Registration No. IBBI/IPA-001/IP-P00 537/2017-18/10962 (Email: [email protected]) is appointed as IRP, subject to the condition that no disciplinary proceeding is pending against him and disclosures as required under IBBI Regulations, 2016 are made by him within a period of one week from this Order. It is further ordered that:

The Petitioner is directed to deposit Rs. 2,00,000/- only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Financial Creditor.

A copy of this Order shall immediately be communicated by the Registry/Court Officer of this Tribunal to the Petitioner /Financial Creditor, the Respondent/Corporate Debtor and the IRP mentioned above.

In addition, a copy of this Order shall also be forwarded by the Registry/Court Officer of this Tribunal to the IBBI for their records.